New Contractor licensing Law puts Responsibility and Liability where it belongs

Construction Managers and Consultants take notice!

On January 1, 2013 California’s Assembly Bill AB 2237 went into effect which basically regulates those submitting bids and performing the actual work (a Contractor), rather than those overseeing or managing work (Construction Managers and Consultants).

The new law is intended to “clearly define when someone is a “Contractor” and discourage unscrupulous individuals from working under a fraudulently obtained owner-builder permit.”1

Apparently, there have been cases when individuals circumvent the contractor license law requirements by calling themselves a “Consultant” or “Construction Manager” but submit a bid to perform certain work, and then provide the labor and materials to perform that same work in exchange for a fee.  The problem is that these individuals may or may not have the proper insurance or bonds in force as required for “Contractors” thus leaving the property owner with all of the responsibility and liability for the work being performed.

Basically, a contractor’s license is not required unless one proposes to or undertakes to do the actual work or some part of it or if the total project cost is less than $500.00.  However, in California, registration with the EDD (Employment Development Department) is required when hiring employees to perform any work.

Here are a few tips and preventative measures for putting responsibility and liability where it belongs:

1.  Community associations, and owners of high rise buildings or common wall structures should advise and educate their entire association or occupants about how to screen and hire contractors because work performed, in only one unit in the building will/can affect the others.  i.e., defective workmanship; and use of inferior materials and/or equipment;

2.  Owner-Builders, Property Owners and Managers should understand that licensed “contractors” perform functions such as (1) proposing to undertake the actual work,  (2) providing and overseeing bids, (3) arranging and setting up work schedules, (4) maintaining oversight of projects, (5) satisfying the sufficiency of bids, plans and specifications and (6),  inspects the work performed by vendors/subcontractors to determine compliance with the plans, specifications and any other construction documents; whereas, “Consultants” and “Construction Managers” do not propose to or undertake the actual work or some part of it; nor do they satisfy the sufficiency of bids, plans and specifications; and

3.  Property Owners should get familiar with the overall process of planning projects, hiring resources, taking bids, and managing performance.

www.constructionplace.com offers free advice and learning systems to its users for under $100.00.  The system includes the new book titled “Construction like Sushi” featuring a four part system and optional interactive self calculating down loadable work sheets that can be modified and reused.  The four part system includes:

1. Planning Projects

2. Hiring Resources

3. Job Costing and Contracting Agreements

4. Managing work performance and payments

And the new Project Registry is a perfect tool for managing and archiving property and project information.

4.  Understand that:

a.  Professional roles that are associated with responsibility and liability when undertaking building construction and improvement projects include, but not limited to,  Agents, Community Managers, Construction Mangers, Consultants, Contractors, Owner-Builders, Owner Representatives, and Property Managers; and

b. Project types include, but are not limited to, Home Improvements, Home Improvement Goods and Services, and any building construction projects.

This information is based on the author’s interpretation of the California Contractor licensing law.  Therefore, everyone should consult their respective local and/or state Contractor license laws and be guided accordingly.

Definitions and Information sources:

EDD means California State Employment Development Department

¹ Contractors State License Board, Press Release 12/31/2012

Comments welcome!